IFRS List.com: Accounting Treatment of "Arrangement fee" paid to bank for term loan

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Accounting Treatment of "Arrangement fee" paid to bank for term loan

27 August 2008 718 views No Comment

Dear All

Please advise your views whether subject item does come under the scope of IAS 23 or IAS 39. The loan facility is repayable in 30 years and interest rate is variable interest rate and we hedge the interest rate by taking interest swap contracts with banks.

In case someone needs more facts to get to the bottom of the case, Please let me know.

with regards

Ram

Dear Ram,

My first reaction would be IAS 39 and not IAS 23 unless the case is that you want to capitalize these costs as part of an asset cost. The latter is not clear from your description. I would treat the arrangement cost as an adjustment to the effective interest of the loan.

Met vriendelijke groet,

Jerry

I agree: IAS 39 with cost as part of the effective yield and the hedge defined as a cash flow hedge.

Met vriendelijke groet,

Peter.

Dear Ram,

Please follow IAS39 for accounting of this hedge.

The IAS23 is only about capitalisation of borrowing cost to asset (ie. under certain conditions you are allowed to capitalise interests from this loan prior to capitalisation of the assets).

I am not sure if the loan was drawn to finance asset development or for other purposes.

Regards,

Jakub